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“I’m Still Standing” is the title of a popular Elton John song and also a partial theme of this most recent earnings season. We see it illustrated by a number of companies, particularly downtrodden retailers that have seemed to be on the brink of disaster only to survive and surprise.

Among those that jump to mind are (JCP) and (BBY). This leads to the natural question - what should one do with these stocks that look like all is doomed?

The first thing to keep in mind if you are going to play names like these in any form, be it straight stock or options, is that it involves a great degree of risk. These are companies that are going through major problems that are well-documented in the financial media, so step one is to do your homework to make sure you aren't just boarding a sinking ship.

If after that research you find conviction in a stock, options can be one way to take a shot at the trade. To play a stock you expected to gain, the first reaction of most folks is to go and buy an out of the money call in order to do this trade. This is most certainly a way to take a position that reflects your outlook, but there may be more advantageous strategies.

Earnings seasons tend to have an extra amount of volatility associated with them as most investors are waiting for the next shoe to drop. But sometimes, as in the case of Best Buy, more resilient earnings than anticipated can fly in the face of those assumptions.

Let’s take a look at a recent example a snapshot of Best Buy, taken the day before earnings, Aug. 19.

Buying a call would have worked out in this specific situation because the stock rallied significantly after earnings, but there is another opportunity: selling puts. The primary and overriding element to keep in mind whenever you sell naked puts is that you must be willing to purchase the stock at the strike price you sell, when the market price of the stock will likely be lower.

Looking at the example above we are going to focus in on the September expiration 29 strike puts. Could we have focused on the weekly options? Absolutely, but the September options offered a bit of extra premium and higher volatility ahead of earnings

Selling puts at $1.15 would have 50.62% implied volatility. This is relatively high for Best Buy. In the pure mechanics of the trade, we are saying that we are selling the put, or willing ot purchase the stock at $29, approximately 5% lower than the current stock price. However, our reward for taking that risk is to receive $1.15 per share in order to do so or $115 per 100-share contract. In taking the $29 (strike price) - $1.15 (premium received) our true break even on this trade is $27.15 (minus transaction costs) or over 8% away from the current stock price. This type of strategy is very interesting to think about in using these high premiums to your advantage.

Another retail example worth looking at is J.C. Penney. A board spat and challenging turnaround has kept the stock in the news for months, and it typically trades with elevated volatility even when it isn't earnings season, but its forthcoming report offered the opportunity below.

Call your attention to the weekly September 12 puts. Again the risk is that in selling these puts was being on the hook to buy the stock at $12 if it should drop below that level. But you would have received $0.70 per share or $70 (minus commissions) per contract. The thing that gets me most excited about this trade however is that your break-even is now $11.30 or 10% away from the at the money strike. Compare that to the purchase of a call such as the September 14 weekly. In that instance the theoretical value is $0.98, so you would have a break-even of $14.98. In this instance the stock has to move over 9% just to break even. That is not a very high probability way to trade options.

In summary, there are many additional risks to trading the stocks that are still standing (as Elton says in the chorus, “Yeah,Yeah,Yeah”) but they can be rewarding if you are willing to accept the extra volatility risks that come with them. The primary thing to keep in mind is how you can use the added volatility as an asset to your trading rather than as a liability. If you are willing to accept these risks, it can be a great tool to have in your arsenal.